We bought an investment property last year, and it's our first, so we're trying to figure out how to do our tax return.

Is our stamp duty and lawyer costs tax deductible? Like say, if I purchased a house for 600k, and I paid 630k after all the lawyer fees and stamp duty, do I just say the house cost 630k (so if I say sold it for 700k, only 70k would be capital gains) or is it more that the house cost 600k but I should be able to claim the 30k as tax deductible?

Also, are bank fees on your investment property tax deductible? I know the interest is but say, there is an annual fee of $395, would that be tax deductible?

1 Answer
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Your stamp duty on the property and the conveyancing (lawyer) fees are added to the cost base when you sell the property, as will any costs for selling the property (e.g. lawyer fees and Real Estate commissions).

So, if your property cost $600K, Stamp Duty on property is $28K, Lawyer fees for purchase is $2K, and the your selling costs are Lawyer fees of $2K and Real Estate commissions of $8K, and you sell for $700K; then your:

If you hold the property for more than 12 months then you get a 50% discount, so your Capital Gains would be reduced to $30K, and if you own the property jointly in 2 names then you half this again to $15K each, and then you each pay tax on this amount at your marginal tax rate.

Regarding fees on loans, yes you can claim this as well as the interest each year as an expense for the property.

Apart from the Stamp Duty on the property you may also pay a smaller amount of Stamp Duty on the mortgage together with any establishment/appraisal fees on the mortgage. You add these fees on the mortgage together and then divide them by 5, and can claim them as borrowing expenses proportioned over 5 years.